Wednesday, February 22, 2012

The 7520 rate for March 2012 again stayed level at 1.4%.

The March 2012 Applicable Federal Rates can be found here.

Tuesday, February 21, 2012


At the request of Congress, the Department of Treasury recently issued a report on donor advised funds. Among other things, Congress had asked the Department of Treasury whether donations to a donor advised fund should be tax-deductible, whether such donations should be treated as donations to a public charity, and whether donor-advised funds should have a minimum distribution requirement. The Department of Treasury answered “yes” to the first two questions and “no” to the third, maintaining the status quo.

The full report can be read here:

Monday, February 20, 2012

The Internal Revenue Service announced that it was extending the portability election deadline for certain estates of married individuals. For qualifying estates, the deadline for making the election is now automatically extended until 15 months from the decedent’s date of death. Typically, the portability election must be made no later than nine months after a date of death unless the executor files a timely Form 4768 requesting an automatic six-month extension. Notice 2012-21 extends the election deadline only for the estates of married individuals who died after December 31, 2010, and before July 1, 2011, with a gross estate that does not exceed $5,000,000. Qualifying estates must make the portability election by filing the Form 706 and Form 4768 no later than 15 months after the decedent’s date of death. The Form 4768 must include a notation that notifies the Service that the Form 4768 is being filed pursuant to Notice 2012-21.


Friday, February 17, 2012

Last week the IRS announced the availability of IRS2Go 2.0, an expanded version of its smartphone app designed to provide taxpayers easier access to practical tools and information. It works on the iPhone and Android devices, and has a new YouTube feature, news feed and tax transcript service in addition to existing tools, such as checking on the status of a tax refund.

To learn more, click here (IR-2012-16, last updated Feb. 8, 2012)

Wednesday, February 15, 2012


This week, let’s take a look at another case from Florida.  You see a lot of trust instruments that ‘require’ a “corporate co-trustee.”  There are a lot of good reasons why the grantor may have wanted a corporate co-trustee to serve with a family member, friend, or other co-trustee.

Then again, as time goes by, a corporate co-trustee may no longer make a lot of sense.  It could be that the trust has been substantially administered or that the corpus is so small that a corporate trustee’s fee schedule just doesn’t work.  That’s when the beneficiaries and trustees usually get together and go to court to have the trust modified to permit the corporate trustee’s resignation and have the trust modified either to allow a single trustee or to allow an individual to serve as co-trustee.  These things are often done by consent order, which the judge is happy to sign to move another case off his or her docket.

But what happens if the trust instrument specifically prohibits judicial modification?

If that’s the case, then according to a Florida appellate court’s decision in Bellamy v. Langfitt the trust instrument means what it says – no modification.

In this action, the trust instrument provided: “If the corporate Trustee fails or ceases to serve, the remaining individual Trustees or Trustee shall choose a successor corporate Trustee, so that there shall always be a corporate Trustee after the Settlor ceases to serve.”  Despite this language, a trial court approved a settlement agreement that allowed a corporate trustee to resign and, rather than having a successor corporate co-trustee appointed, allowed a corporation to act as custodian to receive and hold the income from the Trust assets and to pay the Trust expenses.

The appellate court determined that approval of the settlement agreement was in error because (1) the trust instrument required that there always be a corporate trustee after the settlor ceases to serve; and (2) the trust instrument specifically addressed, and prohibited, judicial modification of the trust by providing: “[t]o the extent permitted by law, I prohibit a court from modifying the terms of this Trust Agreement under Florida Statutes s. 737.4031(2) or any statute of similar import.”

This prohibition against judicial modification applied even if compliance with the terms of the trust is not in the best interests of the persons having a beneficial interest in the trust.

So, before you put a “no modification” clause in a trust instrument, stop and think about the practical effect of never being permitted to modify the trust.

Monday, February 13, 2012

Question: As the parent of a child with special needs, I know I need to have a Will, and probably a special needs trust, but do I really need to have a durable power of attorney for financial affairs?

Yes. Your Will is only effective if you die, whereas a power of attorney is effective while you are alive. If you became incapacitated due to an accident, disease or other cause, no one can handle your financial affairs. At that point, someone would have to hire an attorney and go to court to seek guardianship of your assets, so they have the authority to act for you and continue to pay your and your family’s bills.

However, appointing an agent in a financial power of attorney avoids this costly court guardianship proceeding. Your agent can continue to manage your assets and use your funds to meet the financial needs of you and your family, including your children. In addition to your agent, we suggest you appoint two back-up agents, in case your first agent cannot act. This is especially important if your agent is your spouse, as you could both be incompetent as a result of the same accident. Often clients chose relatives, close friends or colleagues as agents, and it is important that you really trust your agents. Agents should have good judgment and have the financial savvy necessary to manage your affairs. Therefore, the more complex your finances, the more financially sophisticated your agents should be.

Financial powers of attorney can be effective immediately, or they can be effective upon your incapacity (usually as determined by two doctors who confirm you are unable to handle your financial affairs). The latter type is referred to as a “springing” power of attorney, as it “springs” into effect upon your incapacity.

Finally, since you have a child with special needs, if you choose to include provisions in your power of attorney that authorize your agent to make gifts or distributions to your child with special needs, you should discuss with your attorney how those powers should be restricted so that any gift or distribution that your agent makes to such child will not jeopardize his or her ability to apply for or continue to receive his or her government benefits.

Click here to learn about Tanya Harvey’s March and April presentations on “Estate Planning for the Special Needs Family” that are open to the public.

For more information about powers of attorney, click here and here.

Thursday, February 2, 2012

The current economy has created a great opportunity for individuals to transfer assets, and future appreciation of such assets, with little to no transfer tax. This opportunity is created by the depressed asset values and historic low applicable federal interest rates (“AFRs”), which are the minimum interest rates, set monthly, permitted by the IRS. (The current AFR for a loan with a term under three years is 0.19%, three to nine years is 1.17% and over nine years is 2.63%.)

The federal gift tax is imposed on all lifetime gifts that exceed the annual exclusion from gift tax (currently $13,000 per person), and the federal estate tax is imposed on the value of all assets and property that an individual owns at the time of death. Each individual, however, has an exemption of $5,120,000 against the gift and estate tax.

A gift during life of an appreciating asset can reap great transfer tax advantages. The gift in essence “freezes” the value of the asset because all post-gift appreciation is excluded from the individual’s estate. For example, if an individual gifts an asset worth $1,000,000, $1,000,000 of his or her gift tax exemption is applied against the gift resulting in no current gift tax and the use of a portion of his or her estate tax exemption available at death. If the value of the gifted asset increases to $1,500,000 by the time of the individual’s death, the individual succeeded in removing $500,000 of appreciation from his or her estate. (more…)

Wednesday, February 1, 2012

Florida’s new Power of Attorney Act contained in the Florida Statute, Chapter 709, went into effect October 1, 2011. The new statute will affect how attorneys draft, utilize, and enforce powers of attorney (“POA”). Some of the more significant provisions of this new legislation are discussed below.

What is a POA?
A Power of Attorney is a writing in which an individual (the “principal”) grants authority to another individual (the “agent”) to act in place of the principal; each act performed by the agent pursuant to the Power of Attorney has the same effect and benefit to the principal and the principal’s successors in interest as if the principal had performed the act himself.

Why have a POA?

Having an executed Power of Attorney is important in situations where an accident or illness renders an individual incapable of making decisions for themselves. By having an attorney prepare a Power of Attorney, individuals can ensure that their property, assets, and bank accounts are managed by someone they trust to act in their best interests. (more…)